TiVo's New Product Won't Slay the iPad (or Save the Company)
People love digital video recorders (DVRs), and they can thank TiVO (TIVO) for making them possible. However, TiVO's pioneering has been off in the last few years, and the company has lost serious market share. That's why the company's announcement of a new set-top box that will incorporate cable programming and web-based video and audio is critical to the company's future. The hope is that the new Premiere model could reverse TiVO's sliding fortunes.
The idea is interesting. Bring in what many people want from the web -- video and music -- through the familiar television and override the consumers' need for the Apple (AAPL) iPad and the coming onslaught of tablet computers. Only, that's unlikely to happen.
TiVO's clearly in a bad position. By the end of October 2009, the company had 2.7 million subscriptions. That compares with 3.5 the prior year and 4.3 million at the end of April 2007. What's more, 9 percent of the count are lifetime subscribers that no longer generate revenue for the company, so the money-making count is just under 2.5 million. This is the picture of a declining business. The problem for TiVO is that many competitors came on the scene, including cable TV service providers who centrally delivered similar services without needing to buy TiVO boxes.
TiVO needs some way to retain old buyers and attract new ones. Hence, its new product that is supposed to combine "access to cable programming, movies, web videos, and music all in one box." The timing was surely no accident. Next Monday, TiVO will announce its fiscal year 2010 results. Chances are that the company wants investors to have something positive to consider, rather than the continued loss of subscribers that they could expect.
And TiVO is on to something. TiVO might offer something more if it could make the process of acquiring video and audio transparent and as easy to use as choosing channels on a television set. Steve Jobs thinks families will use the iPad as a way to get at media: video, music, e-books, and web pages. But consumers have proven that they like the simplicity of television sets, which largely do what they're supposed to do. Design the system right and you might avoid the frustrations that both Apple and Microsoft (MSFT) have had with their special web access devices for televisions.
Unfortunately, the move is too little, too late. Set-top boxes already incorporate Internet access, so trying to protect the concept from others likely would be impossible. In fact, given that cable companies want to continue being an entertainment conduit for consumers, it would be surprising if they didn't add centrally-delivered streaming web video in the near future, bypassing TiVO the same way they did in the past. Furthermore, LG Electronics added YouTube and Netflix streaming in January 2009. Sony (SNE) and Microsoft stream Netflix to game consoles. Samsung and Philips have television sets with built-in networking support. TiVO's idea would have been great -- two or three years ago. Now, it's just one more voice in a noisy market.